Pricing architecture: the role of the

NHSCB and Monitor in delivering

payment reform

Jason Mann – Transition Director for Pricing, Monitor

John Holden – Director of Systems Policy, NHS CB

17 January 2013

Current PbR: scope, currency, prices & rules all set by SofS

18 January

2013 2

Payment by

Results

Local tariffs

Block

contracts

Current Future

Department of Health Monitor & NHS Commissioning Board

Rules for prices not included in

the National Tariff

Fixed national

prices

Local

modi-

fications

Under 2012 Act, Monitor & NHS CB share responsibility for pricing from 2014/15

Pricing more independent of politics but “double lock” on Monitor and NHS CB

Working together on immediate plans for 2014/15 and medium/longer term vision

2012 Act sets out duties for Monitor and the NHS CB

3

Requirements including:

• To seek to achieve Mandate objectives

• To have regard to NHS Constitution

• To exercise its functions effectively,

efficiently and economically

• To exercise its functions with a view to

securing continuous improvement in quality

of services

• To promote commissioner and provider

autonomy

• To reduce inequality

• To promote patient involvement and choice

• To promote innovation

• To promote integration

NHSCB clauses

General duties:

• To protect and promote the interests of

people who use health care services

• To promote provision of health care services

which is economic, efficient and effective

• To maintain or improve the quality of services

• To enable integrated care

Monitor must also have regard to:

• Maintaining patient safety

• Desirable continuous improvement

• Commissioning fair access to services based on

clinical need and making best use of resources

• Providers cooperating to improve quality

• Promoting research

• High standards for education and training

Monitor clauses

Separate roles, joint responsibility…

18 January

2013 4

Monitor will lead on:

Pricing methodology

Regulated prices

Local modifications

Rules for local pricing and

non-tariff pricing

NHS CB will lead on:

Scope and design of

currencies

Variation rules to National

Tariff currencies

Close working

and agreement

6 shared principles for pricing 1. Enable and promote improvements in care for patients and taxpayers

2. Enable an efficient provider to earn appropriate reimbursement for their services

3. Have regard to sustaining the NHS offer in the long run (taxpayer funded health service, universal and

comprehensive based on clinical need, not ability to pay)

4. Not preclude the delivery of the Secretary of State’s Mandate for the NHSCB

5. Have regard to the principles of better regulation

6. Support movement towards a fair playing field for providers

Currently developing partnership agreement between Monitor and NHSCB…

….pricing is only one of many elements.

We recognise the challenges facing the NHS…

• The NHS will be facing unprecedented challenges in the upcoming years:

financial, demographic and epidemiological

• We know we need a system that can respond to the new demands of

multi-morbidity, chronic conditions and better patient experiences

• Since its introduction in 2004, the tariff has been the subject of much

debate and the objectives it was designed to achieve have evolved in the

past 8 years

• It is a tool that has faced both criticism and admiration, and has become

(perhaps overly) focused upon as a solution to a wide-range of issues,

from waiting times to choice, system re-design and financial viability

• The NHS CB and Monitor have a unique opportunity as new

organisations with joint-responsibility for tariff, to undertake some strategic

thinking on this fundamental national lever 5

Our approach so far….

• Extensive stakeholder engagement through interviews and workshops,

including with international experts and academics

• Research to understand the strengths and weaknesses of the current system

(see Monitor’s website for the Evaluation)

6

Sector

Engagement

& Evaluation

Improving

costing

2014/2015

Policy

Decisions

Long Run

Strategy for

Pricing

• Clear consensus on need for better information –particularly on costing

• Therefore started already – driven also by long time lag between collection and

publication

• 2014/15 is Monitor and NHSCB’s first National Tariff Document

• Under new legal framework we are obliged to consult formally…

…so publication will be earlier than previously (and start with informal

consultation, as per “sense-check” today, in June)

• A long-run strategy for pricing will anchor NHS CB and Monitor’s pricing policy

research, development and decision-making

• Work has started, taking into account sector feedback and evaluations of PbR,

and will need to align to our overall corporate strategies

1

2

3

4

Emerging themes from stakeholder discussions to date

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Theme Key messages/issues

Outcomes

focused

• Commissioning for outcomes: what do clinicians & patients believe will make

a difference?

• Outcomes → develop service model → identify barriers → align incentives →

allow flexibility

• Outcome must be evidence based

Setting

neutral

• Achievement of outcomes across range of settings → co-ordinated or

integrated care and support

• Need to promote efficient functioning of clinical networks and specialist care

• Consider interface between CCG & NHS CB commissioned services (e.g.,

primary care)

Flexibility • One size payment structure/mechanism will not fit all types of care

• Promote local flexibilities to enable innovation

• National standard or guidelines can provide framework for flexibilities

Emerging themes from stakeholder discussions to date

8

Theme Key messages/issues

Manage Sector

Transition

• Need to ensure pricing does not impede change and creates

appropriate incentives (sounds obvious, but..)

• Longer contracting and pricing periods to encourage innovation and

investment

• Managed processes for shift in services between settings

Classification

of patients

• Reflects patient needs over longer term rather then piecemeal

approach to pricing

• Improved coverage of co-morbidities

Data • Need to improve data quality….

• …but recognise trade-off with burden of data collection on providers

Pricing – only

one lever

• Pricing is one lever for change…

• …also clinical guidelines, standards, more information to patient,

competition, benchmarking, support, education...

Monitor has published a strategy for improving costing

9

Methodology Cost allocation standards for providers and costing system

requirements

Only a minimum standard of allocation is mandatory

Costing systems and allocation approaches vary across providers

Develop a single standardised methodology, building on the HFMA’s costing standards

Work with key stakeholders to develop these standards

Collection Who to collect data from,

what should be collected and how frequently

The majority of NHS providers submit average cost by HRG, supplemented by ad hoc patient level collections

Collect patient level data from a sample of providers with standardised methodology

In the meantime, continue to collect reference costs until sample data is robust

Assurance Assurance processes around

cost methodology and collection

Despite a retrospective review of Reference Costs in 2011, in some areas of the costing process there is a lack of assurance

Use peer group reviews, self assessment tools and checklists to improve assurance over costing methodology

Carry out targeted external assurance

Costing Framework Status quo and issues Key recommendations

So – in 2014/15 – our first National Tariff…

10

Our first National Tariff is an opportunity to signal priorities and a direction of travel.

But we need balance…

We expect to outline plans for 2014/15 in April ‘13 – earlier notification than

previously possible – and to reinforce flexibilities in current PbR rules and guidance.

Urgent and important issues

Clinically driven change focussed on

outcomes

Managed shift in legal accountability

Minimise undue price volatility

Change

Stability

Our pricing strategy for the medium to long-run…

11

One size doesn’t fit all in pricing

We are considering

• Different types of healthcare

services or patient groups

• different types of pricing

approaches

• Balance of national direction vs.

local flexibility

… while trying to establish a

coherent and transparent

regulatory framework

But it is anchored around value

Act sets out clear legal duties for

Monitor and NHS CB

Our focus for the long-run strategy

will be how pricing can:

• Improve quality of care for

patients – outcomes and

experiences; and

• Improve efficiency/ reduce costs

… thereby promoting value for

patients today and tomorrow

From April we will seek sector feedback on our proposals

12

Long Run

Vision for

Pricing and

Implications for

pricing in

2014/15

Informal

consultation

(“Sense-

check”) on

2014/15 NTD

Formal

consultation on

2014/15 NTD

Sector

engagement

on Long Run

Vision

April June September

Long-Run

Strategy for

Pricing

[date tbc]